Toronto Dominion Bank’s (TSX:TD) Stock Is Canada’s Best Bank for 2019

Looking for the perfect stock to top up your RRSP? Load up on Toronto-Dominion Bank (TSX:TD)(NYSE:TD) stock — Canada’s best bank.

| More on:
The Motley Fool

In times of market volatility, it is best to load up on assets that are best in class. Regardless of sector, those that have a reliable history of performance and a strong outlook will outperform. It is for this reason Toronto Dominion Bank (TSX:TD)(NYSE:TD) is still my top banking stock for 2019.

This is not to say the other Big Five are bad investments. I have made the case for an investment in Canadian Imperial Bank of Commerce for its high yield and Bank of Nova Scotia for its undervaluation. However, TD Bank is still the safest and most attractive stock in the sector.

Canada’s best-performing bank

All of Canada’s banking stalwarts took a hit this past year. On average, the Big Five lost 12.19% of their value. Outperforming and leading the way once again was TD Bank. This has been the norm over the past 10 years. In 2018, it only lost 7.94% of its value — the lowest of the group. It has similarly outperformed and led the pack over the past two-, five-, and 10-year time frames.

Here is the 10-year chart in terms of percentage price change. As you can see, TD Bank has averaged a compound annual growth rate of 19.7% over this time frame.

TD Chart

An undervalued, top bank stock

The company is also cheap. Trading at 10.3 times earnings, TD Bank is trading below its historical average of 12.6 times earnings. In fact, the bank hasn’t been this cheap since the financial crisis. Canada’s banks always return to trade in line with historical averages, and a return to a P/E ratio of 12.6 is likely. This would imply 12% upside from today’s share price.

Did you know TD Bank has one the highest expected growth rate among its peers? Analysts are expecting 12.15% average earnings-per-share growth over the next five years. As such, its P/E-to-growth (PEG) ratio is currently sitting at 0.90 — the lowest among Canada’s Big Five. A PEG under one signifies that its share price is undervalued as it is not keeping up with expected growth rates.

A top dividend-growth stock

To top it off, TD Bank is also a Canadian Dividend Aristocrat with an eight-year dividend-growth streak. It has averaged double-digit dividend growth over the past five years, which is tops among the biggest banks in Canada.

Don’t expect it to slow down. It has the lowest payout ratio of the group at 44.61% and it drops to 38.59% based on forward earnings. As such, investors can expect a higher than normal dividend-growth average over the next few years.

Foolish takeaway

TD Bank is, simply put, a best-in-class bank. It has a history of outperformance, the highest expected growth rates, and the fastest-growing dividend in the sector. Now is your chance to pick it up at valuations not seen in over a decade. Don’t pass it up.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Mat Litalien owns shares of TORONTO-DOMINION BANK.

More on Dividend Stocks

Train cars pass over trestle bridge in the mountains
Dividend Stocks

Is CNR Stock a Buy, Sell, or Hold for 2025?

Can CNR stock continue its long-term outperformance into 2025 and beyond? Let's explore whether now is a good time to…

Read more »

coins jump into piggy bank
Dividend Stocks

The Smartest Dividend Stocks to Buy With $500 Right Now

These top dividend stocks both offer attractive yields and trade off their highs, making them two of the best to…

Read more »

Middle aged man drinks coffee
Dividend Stocks

Here’s the Average TFSA Balance at Age 35 in Canada

At age 35, it might not seem like you need to be thinking about your future cash flow. But ideally,…

Read more »

ETF stands for Exchange Traded Fund
Dividend Stocks

How to Invest Your $7,000 TFSA Contribution in 2024

Here's how I would prioritize a $7,000 TFSA contribution for growth and income.

Read more »

a man relaxes with his feet on a pile of books
Dividend Stocks

CPP Pensioners: Watch for These Important Updates

The CPP is an excellent tool for retirees, but be sure to stay on top of important updates like these.

Read more »

Technology
Dividend Stocks

TFSA Investors: 3 Dividend Stocks I’d Buy and Hold Forever

These TSX dividend stocks are likely to help TFSA investors earn steady and growing passive income for decades.

Read more »

four people hold happy emoji masks
Dividend Stocks

Love Dividend Growth? Check Out These 2 Income-Boosting Stocks

National Bank of Canada (TSX:NA) and another Canadian dividend-growth stock are looking like a bargain going into December 2024.

Read more »

An investor uses a tablet
Dividend Stocks

A Dividend Giant I’d Buy Over Enbridge Stock Right Now

Enbridge stock may seem like the best of the best in terms of dividends, but honestly this one is far…

Read more »